Not Many Jobs Are Sent Abroad, U.S. Report Says

By EDUARDO PORTER

Published: June 11, 2004

International outsourcing, politicians from both parties often say, has turned into a scourge of American workers, who are losing jobs on a large scale to competition from cheaper workers abroad.

But according to the first government effort to actually measure the phenomenon, such fears may be overblown. A new report released yesterday by the Labor Department on mass layoffs found that in the first quarter of this year, 4,633 workers were laid off because their jobs were moved overseas, a mere 2.5 percent of the total of 182,456 longer-term job losses reported by companies in the period.

Officials acknowledged that the numbers clearly undercount the total number of jobs lost offshore. For one thing, the new data covers layoffs only at companies employing at least 50 workers where at least 50 filed for unemployment insurance and the layoffs lasted more than 30 days. Even more important, the report does not account for jobs created by American companies overseas that did not involve a direct layoff in the United States.

The new data, however, does seem to fortify those experts who have long argued that outsourcing plays a relatively small role compared with other more important factors affecting American job gains and losses.

''Offshoring is not at the heart of the matter,'' said Robert B. Reich, who served as labor secretary under President Bill Clinton. ''I don't think it is a major part of the job picture.''

Instead, many experts say, the job market is driven more by rapid productivity growth, allowing companies to accomplish more work with fewer workers; the introduction of new technologies, which destroy many jobs while creating many others; and the overall level of demand in the domestic economy.

Indeed, while nearly three million jobs were lost from March 2001 through August 2003, the recent recovery of the economy has added 1.4 million jobs since then. And despite the job losses the Labor Department found during the first quarter, over all the economy added an estimated 595,000 jobs during that period.

The new data from the Bureau of Labor Statistics found that about 16,000 layoffs in the quarter were because of the relocation of jobs. Of those, more than 6 out of 10 moved to another part of the country. Of the reported 4,633 jobs lost to other countries, nearly two-thirds were moved within the same company to a new location abroad, while one-third were outsourced to another company.

American corporations have been putting operations in foreign countries for many years. But concern over offshore investments surged not long ago as companies took advantage of advances in telecommunications and other technologies to move a new set of operations, from customer service call centers to computer programming tasks, to lower-wage countries like India that are turning out large numbers of educated software developers earning far less than Americans with comparable skills.

The recent burst of job growth has taken much of the bite from outsourcing as a political issue. Nonetheless, the move of service work overseas raised concerns over the potential loss of the high-wage white-collar jobs that were once considered safe from global competition, igniting angry calls from lawmakers and union officials for action to stem the loss of jobs.

Senator John Kerry, the presumptive Democratic presidential candidate, has dropped most of the attacks against companies that send jobs overseas. But he remains interested in the issue. Gene Sperling, an economic adviser to the Kerry campaign, noted that Mr. Kerry ''opposes tax incentives that encourage the movement of jobs and investment overseas'' and wants a policy ''that does more to create incentives to create jobs in the United States.''

Critics charge that sending jobs offshore could have deep and long-lasting negative effects on the workplace, as more Americans are forced to compete with equally well-trained but cheaper workers in developing countries.

The current labor bureau report said nothing of the impact of outsourcing on wages. Josh Bivens of the Economic Policy Institute noted that competition from cheaper workers overseas can be expected to slow the wage growth of American workers over coming years. Still, the latest evidence suggests that the effect of such trends may be more limited than many feared.

While the new report painted a relatively reassuring picture, Andrew Tilton, an economist at Goldman Sachs, warned that there were flaws in the latest data. The new numbers understate outsourcing because the data was from a small subset of total jobs lost: 182,456 extended nonseasonal mass layoffs compared with 4.5 million workers who applied for unemployment insurance in the period.

Moreover, the labor bureau arrived at its numbers simply by asking companies that reported extended mass layoffs whether they had moved any work to another location overseas or outsourced them to another company abroad. Jacob F. Kirkegaard, a research associate at the Institute for International Economics, a Washington research center that favors reducing barriers to free trade and investment, added that the numbers could thus also undercount the movement of jobs abroad because in the current political environment company executives would rather not admit to such actions.

Estimates by Goldman Sachs -- which include smaller companies excluded by the labor bureau's data -- point to more outsourced jobs by American corporations: 250,000 to 350,000 a year. But even those are quite small numbers in the context of a labor market that employs more than 130 million people.

In a speech last March, Ben S. Bernanke, a Federal Reserve governor, noted that estimates of jobs lost to outsourcing were quite small compared with the 15 million jobs lost every year for all reasons.

''Outsourcing abroad,'' he said, ''simply cannot account for much of the recent weakness in the U.S. labor market and does not appear likely to be an important restraint to further recovery in employment.''

Photo: Companies have taken advantage of advances in telecommunications to move operations like customer call service centers. The centers, like this one in New Jersey, are frequently moved overseas. (Photo by Associated Press)(pg. C5)